Golden Ocean Stock: 9.5%-Yielder Now World’s Largest Dry Bulk Shipper
Why GOGL Stock Has 71% Upside
Thanks to a recently completed acquisition, Golden Ocean Group Ltd (NYSE:GOGL) is now the world’s largest publicly listed dry bulk shipping company.
It recently reported high second-quarter earnings, renewed its share buyback program, and announced a cash dividend of $0.10 per share.
Golden Ocean stock’s price may be down by 7.0% in 2023, but that pullback might be a great opportunity, with conservative Wall Street analysts providing a 71% upside guidance.
Golden Ocean is an international dry bulk shipping company that currently owns and operates a fleet of 95 dry bulk carrier vessels, focusing on the largest markets: Capesize and Panamax. (Source: “Pareto Securities Energy Conference: September 2023,” Golden Ocean Group Ltd, last accessed October 23, 2023.)
Capesize vessels, the largest class of bulk ship, are used to transport coal and iron core. Because of their size (twice as big as an NFL football field), they cannot pass through the Panama Canal. Instead, they need to travel around the Cape of Good Hope—hence the name “Capesize.”
Panamax vessels, meanwhile, are the largest class of ship that can navigate the Panama Canal.
They’re not cheap, if you’re looking to rent one. In the second quarter, the average daily time charter equivalent (TCE) rate for the company’s total fleet was $17,664.
With industry-low cash breakeven rates, Golden Ocean Group Ltd is well positioned to generate significant amounts of cash.
Dry Bulk Shipping Demand to Outpace Supply
The demand for dry bulk shipping is expected to increase significantly through 2024.
To meet this growing demand, in February, Golden Ocean announced plans to acquire six modern Newcastlemax vessels. They’re the largest vessels that can enter the port of Newcastle, Australia, which happens to be one of the world’s largest coal exporters. (Source: “GOGL – Acquisition of Six Newcastlemax Vessels,” Golden Ocean Group Ltd, February 13, 2023.)
The six Newcastlemax ships will be chartered back to their former owner, an unrelated third party, for approximately 36 months at an average daily TCE rate of about $21,000 (net).
Commenting on the acquisition, Ulrik Anderson, Golden Ocean Group Ltd’s CEO at the time, said, “This acquisition cements our position as the largest owner of modern Capesize vessels. It also increases our fleet’s fuel efficiency and reduces its emissions profile as we continue to make progress toward our 2030 emission-reduction target of 30%.” (Source: Ibid.)
Q2 Net Income of $34.9 Million
For the second quarter ended June 30, Golden Ocean reported net income of $34.9 million, or $0.17 per share, up from a first-quarter net loss of $8.8 million, or $0.04 per share. (Source: “GOGL – Second Quarter 2023 Results,” Golden Ocean Group Ltd, August 29, 2023.)
Its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) were $80.4 million, a 47% improvement over its first-quarter adjusted EBITDA of $54.7 million.
The company reported second-quarter TCE rates of $19,083 per day for Capesize vessels and $15,617 per day for Panamax vessels.
Looking ahead, Golden Ocean Group Ltd’s management estimates that it will report TCE rates of:
- $18,300 per day for 79% of the Capesize available days for the third quarter
- $13,510 per day for 98% of the Panamax available days for the third quarter
- $21,500 per day for 34% of the Capesize available days for the fourth quarter
- $16,500 per day for 26% of the Panamax available days for the fourth quarter
During the quarter, the company repurchased 920,243 shares at an aggregate purchase price of $6.9 million, or $7.54 per share. A total of 1.5 million shares at an aggregate purchase price of $11.8 million, or $7.84 per share, have been repurchased under the company’s current share repurchase program.
Commenting on the results, Lars-Christian Svensen, Golden Ocean Group Ltd’s interim CEO, said, “Golden Ocean has continued to deliver solid performance against a very volatile macroeconomic backdrop.” (Source: Ibid.)
He added, “The forecast for fleet supply growth also remains favorable with the orderbook near historical lows. Combined, these factors support our optimistic near and long-term outlook, while closely monitoring the developments in the Chinese economy.”
Cash Dividend of $0.10/Share
Reliable cash flow and a growing shipping fleet mean Golden Ocean Group Ltd can provide investors with reliable, high-yield dividends. That’s when times are good, of course—and right now, they are.
For the second quarter, the company declared a dividend of $0.10 per share, for a yield of 9.45%.
GOGL stock’s payout fluctuates based on the company’s TCE rates and earnings—and it can fluctuate wildly. During the COVID-19 pandemic, the company suspended its dividends, reinstating them in the first quarter of 2021. Golden Ocean stock’s dividend has been going up and down since then, but it’s always been large enough for dividend hogs.
|Period||Dividend Per Share|
(Source: “Dividend,” Golden Ocean Group Ltd, last accessed October 23, 2023.)
GOGL stock is a really good example of why investors should keep a close eye on stocks whose quarterly dividends are directly tied to the economic cycle and are sensitive to supply/demand metrics.
Chart courtesy of StockCharts.com
The Lowdown on Golden Ocean Group Ltd
The world’s leading owner of large dry bulk vessels, Golden Ocean is a great marine shipping company that’s been taking full advantage of the rising demand for dry bulk shipping. To that end, it recently announced plans to acquire six Newcastlemax ships, making it the world’s largest publicly listed dry bulk shipping company.
Golden Ocean Group Ltd’s TCE rates are significantly higher than its breakeven levels, which provides it with a reliable cash flow. The company’s recent acquisitions and newbuilds, as well as industry dynamics, should help Golden Ocean stock continue rewarding investors with a rising share price and growing, high-yield dividends.